But Tuesday's report of residential construction from the U.S. Bureau of the Census put privately-owned housing starts in March 7.2% ahead of Februrary. Starts in February were off sharply  18.5%  from January. March starts trail the March 2010 figure by 13.4%.

The HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months. Two of the HMI's three component indexes declined this month. Current sales conditions fell one point to 16. Sales expectations for the next six months fell three points to 23. However the index gauging prospect traffic rose a point to 13.

"While builders in some areas are starting to see a pickup in traffic of prospective home buyers, many consumers remain skittish about the health of the housing market and overall economy, particularly in view of recent legislative and regulatory proposals that could make it much harder to get a mortgage," said Bob Nielsen, NAHB chairman and a home builder from Reno, NV. "At the same time, builders are competing against a large number of foreclosed and distressed properties on the market, which are holding down prices and appraisals and making it tough for potential clients to sell their existing homes."

According to the Census Bureau, building permits issued for privately-owned housing units in March were 11.2% above February and 13.3% below the same month in 2010.

Housing completions in March fell 14.2% below February. They remain 20.8% below a year earlier.